The City of Soldotna will collect a half percent more in sales tax on purchases in the city beginning next year. The city council approved the increase to 3.5% on Wednesday.
The council came down 5-1 in favor of increasing the city’s sales tax. The half-percent increase is expected to bring in around $1.7 million more dollars to the city each year. As approved, that revenue must be used exclusively on city infrastructure, including major maintenance, new and existing projects, facility improvements and related debt.
Those in favor said the bump is a necessary investment given financial trends, while those opposed said it would financially burden shoppers already feeling the strain of inflation.
Council member Linda Farnsworth-Hutchings sponsored the proposal. On Wednesday, she said adjusting the city sales tax ensures the financial burden doesn’t fall entirely on property taxpayers.
“We have people that come from out of the state,” she said. “They are again using all of our facilities. So I feel that this is an equitable way to distribute the cost of what it costs us to maintain the city the way that everybody seems to want us to to maintain it.”
The proposal was first floated at a city work session earlier this year. At that meeting, city officials said Soldotna’s services have expanded and spending has grown over the last two decades faster than revenue. That had city staff brainstorming ways to ensure it could continue funding its needs.
City Manager Janette Bower says city staff recommended a sales tax increase after considering multiple options.
“We don't want to cut services, so we did look at every funding option,” she said. “We will always chase funding options – any available grant opportunity or any other opportunity, but we did look at, what else could we do? And this, this is the proposed solution.”
The function is similar to a 4% lodging tax Soldotna implemented last year, which exclusively funds city recreation services.
Four people testified against the increase in-person at Wednesday’s meeting. Braeden Garrett said the council should only adjust taxes as a last resort.
“I think many residents, including myself, are simply looking for reassurance from the council and from the city that existing resources are being maximized as effectively as possible by the city before additional taxation is pursued,” he said.
Soldotna resident Nick Sorrell also testified in opposition. He later wrote about the vote outcome in a news story for KSRM Radio Group, but told the council he was giving testimony in a personal capacity. He says a higher sales tax will make Soldotna less economically competitive compared to neighboring areas.
“A half percent increase may sound small in isolation, but combined with other taxes and rising costs everywhere in people's lives right now, it contributes to a broader feeling that government's answer is always to tax payers more,” he said. “I also do not believe every alternative has been exhausted before asking taxpayers for additional revenue.”
The lone council vote against the tax bump came from member Dave Carey. He says Soldotna has always been a hub for the central Kenai Peninsula, and said the city shouldn’t feel compelled to raise taxes just because decades have passed since the last increase.
“I would like to see more discussion on this,” he said. “I'd like to see more input. I appreciate the discussion of each person here, but I also want to say I've talked to a lot of people in the community, and I haven't found anyone other than people very closely involved with government who are in support of this.”
The council received one letter supporting the tax increase from Elizabeth Chilson, who said the additional revenue could offset the impact of non-resident use on city facilities and roads. She is married to council member Jordan Chilson.
Other council members said Soldotna has a demonstrated history of financial prudence and needs to be proactive amid current economic conditions. Jordan Chilson pointed to declining grant opportunities from the state for infrastructure projects, as well as the impact of inflation – on the city.
“We just don't want to dig ourselves into a hole where we continue to defer maintenance to a point where, you know, we're saving expenses today to only face exponentially higher expenses years down the road from now, when we can't kick that can any longer,” he said.
The increase approved Wednesday makes Soldotna’s sales tax a half-percent higher than Kenai’s. Including the Kenai Peninsula Borough’s 3% sales tax, shoppers in Soldotna will now pay 6.5% on purchases starting next year.
